By one measure China is green, but we should skip the angst

Lauren Steffy

Tuesday

Mar 30, 2010 at 12:01 AM

As if we didn't have enough to worry about, a new study has found that China is beating us at the renewable energy game.

This apparently has generated quite a bit of concern. A quick scan of the Internet reveals such hand-wringing headlines as: "China trouncing U.S. in clean energy investing" and "China is now the greenest country in the world."

Calling China, which still gets almost three-fourths of its energy from coal, "the greenest" is like calling Jim Cramer demure.

The study, released this week by the Pew Charitable Trusts, found that China invested $34.6 billion in renewable energy last year while the U.S., which had been the biggest spender since 2004, fell to No. 2 with just $18.6 billion.

What's more, our growth rate also lags behind that of Turkey, Brazil, the U.K. and Italy.

All of which raises an important question: So what? The Pew study looks only at investments in energy that it deems clean: primarily wind, solar and biofuels. Those power sources are indeed clean, but they're also expensive and inefficient.

Left off the study is natural gas, a fuel that is cleaner than coal and oil, and abundant and affordable. The billions of dollars pumped into shale gas developments in recent years apparently don't count.

Instead, the Pew study casts renewables investment as some green arms race in which we have to outspend the communists no matter how much it lacks economic sense.

Wind and solar power remain among the most expensive energy sources and are likely to remain so, according to the U.S. Energy Information Administration.

In its 2010 energy outlook, the EIA estimates that electricity from wind farms will cost $149 a megawatt-hour, compared with $83 for natural gas-fired generation.

Meanwhile, the International Energy Agency projects that wind power will continue to cost about 20 percent more than natural gas-generated power through 2020.

So why is China spending so much money on renewables? It doesn't have much choice. China's energy consumption is growing faster than any other country. If it has any hope of keeping up with that demand, it's going to have to outspend every other nation on the planet, both in renewables and in conventional energy.

In other words, the dollar figures in the Pew study don't address the scale of the investment. Despite its increased spending on renewables, coal remains China's fuel of choice, and it's spending far more on coal development than anything else.

In fact, less than two years ago, China announced plans to spend almost $22 billion -- more than the entire U.S. investment in renewable energy last year -- just to expand railways that could move coal out of the mining regions of Shanxi province.

China, it seems, is betting on coal as a fundamental fuel source for years to come.

As for the U.S., our numbers may not lag China by as much as the study makes it seem because its did not include money awarded through government grants or corporate research spending.

That adds another $7 billion or so to the U.S. number, according to the EIA. Comparable numbers for China are not available.

What's more, the Pew study focused on financing sources such as debt, equity and venture capital that have been much harder to come by since the financial meltdown, which hit the U.S. and Europe harder than Asia.

Rather than having invested too little on wind, solar and other fuels of economic fantasy, we may be spending too much.

We need to pursue a broad menu of energy options, including nuclear power and other alternatives that are efficient and clean -- but they also have to be affordable.

Who's spending more on the most expensive and inefficient forms of energy is something we don't need to worry about.